PE space needs PLI-like framework, says Bain Capital's Amit Chandra

Q: In the Budget this year, the govt has acknowledged the importance of the private equity space. What is the change that you have seen in the last two years in terms of behaviour of FPI flows? 
Ans:
>Industry has contributed enormously to national development
> Few years ago, PE and VC inflows in India used to be $20-30 billion a year
>Last year PE and VC inflows in India touched $50 billion
>PEs and VCs now contribute to a lion’s share of India’s FDI
>Strategic investors have become insular globally, and PE/VC investors have replaced them
> PEs and VCs have dwarfed FII inflows
>Govt is realising that PE and VC investors are stable and increasing their allocation in India
>Aspire to increase PE and VC inflows to $75 billion in a year
>Propose creating a local PE and VC community
>Govt should address the pain-points and envision a long-term roadmap to accelerate the growth rate

 
Q: You said that strategic investors are getting insular. Why’s that happening? And referred to a local PE and VC community. What is the situation today on the ground?
Ans:
>After the global financial crisis, strategic investors fortified their home markets
>Many sovereigns raised the barrier for cross-border investments
>Domestic institutional investors is critical to the market
>Selloffs in Indian equity markets are cautioned by domestic institutional and retail investors
>Need to figure how India can become a financial services powerhouse in Asia and the world
 
 
Q: How do you do that? What are the one or two things that the policy would require?
Ans:
>A high-level committee can look at issues on taxation of PEs and remove disincentives
>PEs could be allowed to distribute shares in species
>Revisit the framework of each regulator to make it easy for insurance companies invest in PEs
>Insurance companies, banks, pension funds are huge investors in PEs
>The industry has not played a big role in funding MSMEs
>Propose selective incentives to encourage PEs and VCs to invest in MSMEs
>Propose govt to become co-investor in MSME funds

 
Q: Where will the money come from?
Ans:
>A decent fund creates 2.5x returns in five years
>Need to widen the ambit of some funds rapidly
 

Q: If you look at the PLI scheme, there is a global part and a domestic part. If you are going to look at ta similar model, from a govt’s perspective one would also look at how they create funds that are specific to India. Do you see that’s also happening when you talk of Aatmanirbhar Bharat?
Ans:
>Most global firms are not likely to start India-specific funds
>Global firms generally don’t like country-specific funds, because continent-specific funds give better diversification 
>Many foreign LPs who like to participate in a country come in through a local firm and get their exposure through different kind of vehicles
 

Q: The government has also big plans for asset monetisation of infrastructure projects. How do you see this opportunity as a global PE investor? Will you participate in conjunction with domestic PE players?
Ans:
>No distinction between domestic and international investors in this opportunity
>It is an opportunity to participate in the cash flow
>Investors will probably participate through companies in which they have stakes — it does not matter whether it is control or not
>There are hundreds of such companies in which global PEs have stakes in India
>Investors could fund such transactions through equity inflows using a rights issue or preferential issue in companies where they already have stakes
 

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